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More And More, Joblessness Wears A Business Suit

February 27, 1994

Economic Trends

MORE AND MORE, JOBLESSNESS WEARS A BUSINESS SUIT

The Clinton Administration's Council of Economic Advisers (CEA) has issued its first annual Economic Report of the President, and the turquoise-colored, 398-page tome offers intriguing analysis of the U.S. labor market, where unemployment is down, yet workers are still worried about their jobs.

The report considers the puzzle of why the recent downturn has been called a "white-collar recession" even though the unemployment rate for white-collar workers is still one-third that for blue-collar workers. The answer: The white-collar jobless rate relative to the blue-collar rate is dramatically higher now than it was in the early 1980s, and the ratio keeps rising (chart).

Even while the fortunes of some white-collar workers have worsened, the CEA laments the growing income differences between well-educated workers and their less-educated counterparts. White-collar workers who have kept their jobs have benefited mightily from the greater importance of skills and education, while the undereducated have fallen behind. The report also notes "increasing disparities between black and white rates of both employment and unemployment," which may be helping to widen the distribution of income.

Still, the CEA is skeptical of the claim that the U.S. is stuck with a large pool of obsolete and permanently unemployable workers because of changing skill requirements, corporate downsizing, and defense cuts. True, the length of unemployment is up, as is the number of discouraged workers--people who have stopped looking for jobs. But the CEA argues that these changes could be explained by slow growth, rather than structural changes in the labor market. The number of discouraged workers has actually increased less than would be expected, given the weak recovery. This suggests that faster growth can solve much of America's employment ills.EDITED BY MICHAEL J. MANDEL Paul Magnusson in Washington